EDITORIAL Make in India The government has taken several radical measures to make doing business in India easier through the 'Make in India' initiative. It has initiated the process of use of technology, convergence and integration of departments across sectors. Such measures will make India a much better place to invest, create jobs and wealth, and enhance production and productivity. The government has opened up a vast range of sectors for foreign direct investment (FDI). There is also a focus on 25 sectors where India can be a world champion. The government has decided to aggressively market these sectors across the world. This plan also focusses on improving and enhancing infrastructure – industrial corridors, manufacturing cities and industrial clusters while also nurturing cutting-edge innovation. On the other hand, India's position has dropped further by two places to 142 out of 189 nations in the World Bank's global ranking on ease of doing business. Some of the mindboggling challenges ahead include: For starters, basic transport, power and such infrastructure have to be created, in many places virtually from scratch; then go for investment-led infrastructure creation, like industrial corridors, smart cities and exportoriented infrastructure; initiate labour reforms to improve productivity; hasten approvals and clearances, and make access to credit easier among other which is a long, long to-do list. The challenge is to get the lion roaring and striding into at least 25 industrial sectors – sectors that can lean on India's core strengths and those that can benefit from import substitution, from defence and railways to food processing and wellness; into all states; and into all manufacturing firms, from the Ambanis and Adanis to the smallest of SMEs. The SICCI believes that the Make in India programme has begun well and will give the country appreciable indigenous capability in defence systems, help boost the economy, and generate considerable employment.
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C H A M B E R AT W O R K Executive Breakfast meeting on Domestic Transfer Pricing SICCI organized Executive Breakfast meeting on Domestic Transfer Pricing on 6th September, 2014 at Hotel My Fortune, Chennai. Mr. B. Sriram, Chairman, SICCI Taxation Committee moderated the panel while other members including Mr. K. Viswanathan, CFO, iNautix Technologies Ltd., Mr. Neelakanta, Head - Taxation, Ashok Leyland India, and Mr. N. Mathan, Ernst & Young LLP made presentations and interacted with the participants.
Mr. B. Sriram, Chairman, SICCI Taxation Committee, interacting with the participants.
Mr. N. Mathan, Ernst & Young LLP, making presentation.
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Leadership Series IV - Developing Leaders at all levels through Purpose Driven Coaching SICCI organized a one day workshop on - Developing Leaders at all levels through Purpose Driven Coaching on 20th September, 2014 at Hotel Vivanta by Taj Connemara, Chennai.
Mr. Jawahar Vadivelu, President, SICCI, delivering the welcome address.
Ms. Sadhana Somasekhar, Jt. Managing Director & Global Head for Growth & Emerging Markets, Future Focus Infotech P. Ltd., delivering the inaugural address.
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Mr. Jawahar Vadivelu, President, SICCI delivered the welcome address and said that most organizations had leaders at the executive level, capable of handling various challenges and hurdles. However the real challenge was to develop leaders at all levels in the workplace, from the shop floor to the board room who know what to do when no-one knows what to do. He further said that Leadership at every level in an organization was essential because leaders are the stewards of organizational energy. Ms. Sadhana Somasekhar, Jt. Managing Director and Global Head for Growth & Emerging Markets, Future Focus Infotech P. Ltd., delivered the inaugural address. Mr. Joseph Abraham, learning and development consultant, Royal Bank of Scotland was the facilitator.
Mr. Jawahar Vadivelu, President, SICCI presenting a memento to Mr. Joseph Abraham, learning and development consultant, Royal Bank of Scotland.
A view of the participants.
Mr. Jawahar Vadivelu, President, SICCI presenting a memento to Ms. Sadhana Somasekhar, Jt. Managing Director & Global Head for Growth & Emerging Markets, Future Focus Infotech P. Ltd.,
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Interactive meeting on Business Opportunities with Switzerland The Southern India Chamber of Commerce and Industry organized an Interactive meeting on Business Opportunities with Switzerland on 23rd September, 2014 at Binny Room, Vivanta by Taj Connemara, Chennai. Mr. Jawahar Vadivelu, President, Southern India Chamber of Commerce and Industry delivered the Welcome Address and said that Switzerland was amongst the preferred destinations for Indian companies, due to many advantages it offered to foreign investors. An increasing number of Indian companies were establishing their presence in Switzerland, which had a very strong economy and was a first-class location for Indian investors. Switzerland was characterised by a high degree of political stability, a flexible labour market with access to well-qualified personnel, a strong concentration of innovative high-tech companies, outstanding infrastructure and an attractive taxation system. He further said that Switzerland was an open economy with a strong international orientation, and therefore attached a great deal of importance to its foreign trade policy. Mr R Muthu, Hon. Consul of Switzerland, Chennai delivered the Introductory Remarks and said that speaking about relations between Switzerland and India meant speaking about the relationship of a small sized country with an 80 times bigger country in terms of size and 150 times bigger country in terms of population. In economic terms,
Mr. Jawahar Vadivelu, President, SICCI, delivering the welcome address.
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however, India was about three times bigger than Switzerland. Mr Siamak Rouhani, Head of Economic & Commercial Section, Embassy of Switzerland delivered his address on Switzerland as a Competitive Business Location. Mr. Michael Enderle, Director, Swiss Business Hub India, Switzerland made a presentation on Switzerland as a European Corporate Headquarters & the Role of SBHI. Mr. Tarun Gupta, SIX Swiss Exchange spoke on Switzerland as a Hub for Banking, Investment and Capital Raising while Mr Sai Prasad, Managing Director, Wurth India made a presentation on the Shared Experience of Working with Switzerland.
Mr. R. Muthu, Hon. Consul of Switzerland, Chennai addressing the meeting.
Mr. Jawahar Vadivelu, President, SICCI, presenting a memento to Mr. Michael Enderle, Director, Swiss Business of India.
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Mr. Jawahar Vadivelu, President, SICCI, presenting a memento to Mr Siamak Rouhani, Head of Economic and Commercial Section, Embassy of Switzerland.
Mr. Jawahar Vadivelu, President, SICCI, presenting a memento to Mr. Sai Prasad, Managing Director, Wurth India.
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Panel Discussion on India's External Trade and Policy Initiatives SICCI jointly with FIEO organized Panel Discussion on India's External Trade and Policy Initiatives on 10th October, 2014 at Hotel Vivanta by Taj Connemara, Chennai. Mr. Jawahar Vadivelu, President, SICCI delivered the welcome address and said that the latest data on India's foreign trade showed signs of revival in the country's exports following the 6 month period of subdued /negative growth. Exports during August, 2014 were valued at US $ 26958.22 million (Rs. 164162.61 crore) which was 2.35 percent higher in Dollar terms (1.39 per cent lower in Rupee terms) than the level of US $ 26337.98 million (Rs. 166479.20 crore) during August, 2013. The trade deficit for April-August, 2014-15 was estimated at US $ 56151.16 million which was lower than the deficit of US $ 70602.13 million during April-August, 2013-14. He further said that India's overall approach to dealing with an ever-changing world has been and will be consistent - to grasp emerging opportunities, while exercising eternal vigilance against traditional and non-traditional threats.
Mr. Jawahar Vadivelu, President, SICCI, delivering the welcome address.
Mr. Rafeeque Ahmed, Vice President, SICCI and President, FIEO made a presentation on the overview of export trends. Dr. H A C Prasad, Sr. Economic Adviser Ministry of Finance, Government of India delivered a special address. He said that our aim needed to be to increase India's share in world merchandise exports from 1.7 per cent in 2013 to a respectable ballpark figure of, say, at least 4 per cent in the next five years. He further said that enhancing export competitiveness by improving the ease of doing business in India and reducing costs (both credit & non-credit) needed be an important agenda for the coming years.
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Mr. Rafeeque Ahmed, Vice President, SICCI and President, FIEO presenting a bouquet to Mr. Mayank Kumar, IRS, Commissioner of Customs (Exports).
Mr. Raghu Shankar, Chairman, SICCI Shipping Committee, presenting a bouquet to Mr. J V Patil, ITS, Zonal Joint Director General of Foreign Trade
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The panel was moderated by Mr. Raghu Shankar, Chairman, SICCI Shipping Committee, and included Mr. J V Patil, ITS, Zonal Joint Director General of Foreign Trade and Mr. Mayank Kumar, IRS, Commissioner of Customs (Exports).
A view of the participants.
Half Day Session on New Companies Act 2013 SICCI jointly with Indian Chamber of Commerce and Industry, Tuticorin organized a Half Day Session on New Companies Act 2013 on 29th October, 2014 at Hotel DSF Grand Plaza, V.E. Road, Tuticorin. The session was covered with various issues of the New Companies Act 2013, in terms of Capital raising, auditing, and financial reporting, auditing aspects of related – party transaction; corporate governance and risk management, and tax issues arising out of the Companies act, and its mandate on Corporate Social Responsibility. Mr. V N Shiva Shankar, Lawyer, company secretary and cost/management accountant said that the primary objective of the program was to ensure transparency and accountability in corporate governance.
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ARTICLE How Modi Can Deliver on the Promise of ‘Make in India’ Knowledge@Wharton Within the 24 hours surrounding Indian Prime Minister Narendra Modi’s announcement of the government’s new, pro-manufacturing “Make in India” policy, the nation also boasted a successful mission to Mars and a credit rating that had been raised from “negative” to “stable” by Standard & Poor’s. Suddenly, a lot of things seemed to be going India’s way – but for “Make in India,” at least, there are plenty of hurdles ahead.
jobs will be created in the industrial sector and the economy will get a boost. Japan started its growth path by making goods for the U.S. China has a strong manufacturing base. India can achieve the same.”
Getting Rid of Red Tape “There are several hurdles to Modi’s Make in India campaign,” counters Ravi Aron, professor at Johns Hopkins Carey Business School. “The reason that there is very little manufacturing investment in India is not because the country has done a poor job of marketing itself. India today is a bad choice for foreign investment in manufacturing. It is not surprising that manufacturing accounts for only about 15% of the Indian GDP.”
The campaign, which focuses on the manufacturing sector, is not going to be easy to deliver, despite the enthusiasm that accompanied the launch of the effort’s new logo and website. FDI (foreign direct investment), Modi, told investors, should stand for First Develop India. “India is the only country in the world which Modi has not yet initiated many policy changes to offers the unique combination of democracy, improve the business climate in India, although he has demography, and demand,” he said. In the audience were assured investors that a red carpet will CEOs from abroad – Maruti Suzuki’s replace red tape. India is currently ranked Kenichi Ayukawa and Lockheed Martin’s The Indian consumer 134th in the World Bank’s Ease of Doing Phil Shaw – and home, including Tata Business list. According to government Group chief Cyrus Mistry, Reliance head has come of age, officials, as part of the Make in India Mukesh Ambani, Kumar Mangalam Birla and domestic initiative, all hurdles related to starting or of the Aditya Birla Group and IT tycoon demand will continue doing business in India will now be Azim Premji. resolved in a maximum of 72 hours. The to increase to justify government has created a panel of experts Modi followed the launch with meetings with other CEOs, such as Mary Barra of the production of and representatives from various General Motors, Jeff Bezos of Amazon, departments to hear issues related to goods in India. Mark Zuckerberg of Facebook, Satya domestic and global investment. To put Nadella of Microsoft and (earlier) Indra that in perspective, Vodafone has been Nooyi of PepsiCo. They all gave the appropriate fighting the government in the courts for several years. soundbites to the media. But the key question is: Will Walmart is still waiting on the sidelines, having they bite? Will they be able to convince their boards and abandoned its partnership with the Bharti Group. companies to invest in India? Will Make in India work? Almost a month after the new policy was announced, the “This is a great idea,” says Jagmohan Raju, professor of government amended some of the labour laws. The marketing at Wharton. “The Indian consumer has come changes pertain to the system of inspection of companies, of age, and domestic demand will continue to increase to known as the Inspector Raj. Under the new system, inspectors will no longer be able to visit companies of justify the production of goods in India. If goods are their choice and stay there for as long as they want. A produced in India, it creates manufacturing sector jobs. It creates an infrastructure of ancillary industries. More computerized database system will decide who goes
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where. There is also a time limit for filing reports. An online Shram Suvidha portal has been unveiled for employers to submit one compliance report for 16 labour laws. “These facilities are what I call minimum government, maximum governance,” Modi said at the launch of the campaign. There were a few other measures, such as portability of provident funds, designed to benefit employees. But the Industrial Disputes Act, which does not allow a company to close down a loss-making unit, remains intact for now.
India’s ranking by 85 rungs in the World Bank’s Doing Business survey, he has not outlined a specific strategy to achieve this goal,” Kapoor notes. “What the policy does, however, is to send signals of vigor and enthusiasm. But it will take a lot more than a flashy new website, a new lion symbol and catchy phrases to make India a manufacturing powerhouse and create productive jobs for India’s rapidly-expanding workforce.” Adds C.S. Rao, chief economist at apex chamber Assocham: “At this point, the policy mirrors Modi’s thoughts. It needs to be seen how it turns out.” According to Kumar Kandaswami, senior director at Deloitte Touche Tohmatsu India, so far the campaign is “a statement of intent.” That said, he adds, “it is a very important one as it will mobilize activity and direct the attention of stakeholders. The government has brought on board industry leaders. The fact that this is held out as an important initiative of the prime minister means that there will be serious follow-up action.”
“Modi has taken the position that India must be transparent and efficient,” says Janice Bellace, professor of legal studies and business ethics at Wharton. “Poor infrastructure, crony capitalism and corruption have likely done more to dissuade investment than labour laws. What Modi needs to do is eliminate outdated legislation and replace them with up-to-date laws, where appropriate, and streamline compliance and enforcement procedures. Most importantly, Modi should commit the government of India to ‘decent work,’ an International Labour Organization term that includes opportunity, security, adequate remuneration and freedom of association.”
Poor infrastructure, crony capitalism and corruption have likely done more to dissuade investment than labour laws.
No one is quarreling with the need to boost manufacturing, but Pankaj Chandra, professor of production and operations management at the Indian Institute of Management Bangalore, says that the government must take a proactive approach if it wants to get results. “In the past, the bureaucrats didn’t do their part of the job. They did not have the strategic framework,” Chandra notes. “There were the big manufacturing investment zones. But the bureaucrats couldn’t see beyond a real estate play. And manufacturing is everything but a real estate play. The world over, manufacturing has changed. Modern manufacturing is about science and technology, R&D, new processes, innovation, skills and quality. If we can’t do all this, I don’t think the Make in India project will work.”
A Mindset Shift Modi is trying to change mindsets — that of labour, of bureaucrats and of employers. “The policy offers few tangibles except acceptance of self-certified documents, a 72-hour window to get clarifications on the Make in India website and 25 defined focus areas,” says Radhicka Kapoor, fellow at the Indian Council for Research and International Economic Relations and the author of a recent paper titled, “Creating Jobs in India’s Organized Manufacturing Sector.” “While the PM has acknowledged that India is indeed a difficult place to do business due to the large number of regulatory bottlenecks and has set a target of elevating
But Babu Khan, senior director (manufacturing & infrastructure) at apex chamber the Confederation of
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Indian Industry (CII), says that “Make in India” is more than a statement of intent. “[Make in India] underscores a sound strategy and the strong reforms process that the new government is committed to,” Khan says. “The Indian economy is at a major turning point, as we can now look back at the global financial crisis and move ahead toward economic revival.”
2011, the department of commerce finalized a strategic paper on doubling India’s exports from $246 billion to $500 billion in the next three years (2011-2012 to 20132014). Merchandise exports needed to grow at 26.7% to achieve this target. For the record, the manufacturing sector saw a decline of 1.4% in August 2014.
The figures have not changed materially; only the target Khan adds that recent statistics show how critical it is year has moved from 2015 to 2025. A more recent FICCI for India to focus on boosting manufacturing. “After report dated August 2013 notes: “In the current scenario, growing at 10.1% during the five-year period 2005-2006 to expect manufacturing to grow at 14% (as targeted) on to 2009-2010, the manufacturing sector slowed down a long-term basis may not be feasible.” (Incidentally, sharply, growing at just 4.2% in the past Modi has appointed former McKinsey four years,” he explains. “As a result, its India chairman Adil Zainulbhai as chief share in GDP has declined to 14.9% in The Indian economy of the Quality Council of India, which 2013-2014 from a peak level of 16.2% in is at a major turning will spearhead the Make in India effort.) 2009-2010.” point, as we can now Aron says that there are several things fundamentally wrong with India that will Déjà Vu look back at the continue to stifle manufacturing. “There This is not the first time that India has tried global financial crisis are four classes of deficits,” he explains. to boost its manufacturing prowess. In First are the factors of production. India and move ahead 2004, the Confederation of Indian Industry faces crippling shortages in, for example, toward economic (CII) and McKinsey produced a report power. Businesses are forced to rely on titled, “Made in India: The Next Big revival. expensive and inefficient ways of Manufacturing Export Story.” According producing power. India’s labour laws to the report, “Manufacturing exports from India have make it hazardous for businesses that face seasonality in not taken off even though India has several advantages, their demand to set up mass production facilities. By including engineering skills (process, product, quality telling industry that it cannot retrench a part of the and capital), a growing domestic market, a raw material workforce in accordance with falls in demand, India has base and a large pool of skilled labour.… India has the succeeded in making original equipment and component potential to increase manufacturing exports from $40 manufacturing extremely unattractive, Aron notes. billion in 2002 to $300 billion by 2015.” Second, continues Aron, are the enablers of production – In 2004, the government set up the National such as surface transport and ports. “Manufacturing Manufacturing Competitiveness Council (NMCC). In requires a significant edifice of infrastructure support. 2006, the NMCC came out with a national strategy for This edifice is absent in India,” he points out. manufacturing. The objective: to raise the share of “The third set of issues has to do with the legal regime. manufacturing in GDP from 17% to 30%-35% by 2015. The council dubbed 2006-2015 as the “decade of Laws are made to suit the extremely myopic and expedient objectives of the regime in power,” Aron manufacturing in India.” In 2012, McKinsey wrote: “If notes. “The Vodafone retroactive taxation is a case in India’s manufacturing sector realized its full potential, it could generate 25% to 30% of GDP by 2025.” In May point. Even after the Supreme Court ruled that the
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adds. First are supply efficiencies: Large volume component manufacturers move to a region because they wish to co-locate with other firms in the same supply chain. “Between 1985 and 2000, many manufacturers went to China because of cheap labour,” Aron notes. “But their growth in the second phase – from 2000 through 2012-2013 – was because an ecosystem of suppliers comprising members… of many business verticals – semiconductors, medical equipment, heavy electrical, molded plastics and toys – had sprung up in China. In other words, many firms took their The growth in manufacturing to China because their supply chain partners were manufacturing jobs is not really about where unskilled already there. Companies first went to China for cheap labour, but stayed labourers swing their for supply chain efficiencies.”
company did not owe taxes, Parliament passed a retroactive law to claim the money from Vodafone in what must surely seem to foreign investors like statesponsored larceny. Walmart, Amazon and Nokia are all faced with capricious tax and business laws being implemented by a corrupt bureaucracy. Is it any surprise that Microsoft did not include Nokia’s manufacturing facility in Chennai in its deal for Nokia’s phone and tablet assets. The reason? Tax terrorism again.” Finally, there is chronic, all pervasive corruption. It is only the fourth deficit that Modi can tackle to some extent, says Aron. Raju contends that Aron is too pessimistic. On infrastructure, for instance, “many manufacturing companies in India and elsewhere do create their own infrastructure. Look at Jamshedpur [a city with a population of more than 600,000 built by the Tatas over 100 years].” But he sees other problems. “I am less worried about labour laws, and more worried about the availability of a skilled workforce,” he says.
hammer at a widget moving on the assembly line; it is about workers that calibrate, operate and manage machines as a part of the manufacturing routine.
The second issue is the extent of automation in production, continues Aron. “In industry after industry, we have seen automation in the form of robotic production, digitization of business processes and precision manufacturing techniques,” he points out. “Manufacturing is returning to the U.S. much faster than manufacturing jobs are. The growth in manufacturing jobs is not really about where unskilled labourers swing their hammer at a widget moving on the assembly line; it is about workers that calibrate, operate and manage machines as a part of the manufacturing routine.
Kandaswami says the Make in India policy can bring in more FDI, make the sector more competitive, create good quality jobs and enhance the quality and quantum of exports. “But the vision statement has to be followed up by action on the policy and implementation fronts,” he explains. Not delivering on the promise would be a significant setback for manufacturing in India.
Even with all these challenges, Modi could still attract some manufacturing FDI to India, Aron says, though it would be nothing like China’s “spectacular gains” made between 2000 and 2010. “But nonetheless, [it could be a] significant amount,” he notes. “Before he does that though, he will need to build roads, ports and power plants – the manufacturing infrastructure. Perhaps a CEO could tell the PM: ‘If you build it, they will come.’”
Has Time Run Out? Considering that India realized the manufacturing imperatives several years ago and did nothing but produce a series of reports that gathered dust, it may already be too late. “The window for growth through export-led manufacturing may well have closed for India,” says Aron. There are two reasons for this, he
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ARTICLE Make in India – A Summary arrival in the country to the time of their departure. The information & facts that potential investors need for each sector have been compiled in brochures.
Through the Make in India initiative, the government rolled out plans to focus on building physical infrastructure as well as creating a digital network to make India a global hub for manufacturing of goods ranging from cars to software, satellites to submarines, pharmaceuticals to ports and paper to power.
2. Consolidated services and faster security clearances: All central government services are being integrated with an e-Biz single window online portal while states have been advised to introduce self-certification. The ministry of home affairs have been asked to give all security clearances to investment proposals within 3 months.
About Make in India: The focus of Make in India programme is on creating jobs and skill enhancement in 25 sectors. These include: automobiles, aviation, chemicals, IT & BPM, pharmaceuticals, construction, defense manufacturing, electrical machinery, food processing, textiles and garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality, railways, automobile components, renewable energy, mining, biotechnology, space, thermal power, roads and highways and electronics systems.
3. Dedicated portal for business queries: A dedicated cell has been created to answer queries from business entities through a newly created web portal ([http:// www.makeinindia.com). The back-end support team of the cell would answer specific queries within 72 hours. The portal also boasts of an exhaustive list of FAQs answers. 4. Interactions with the users/visitors: A pro-active approach will be deployed to track visitors for their geographical location, interest and real time user behaviour. Subsequent visits will be customised for the visitor based on the information collected. Visitors registered on the website or raising queries will be followed up with relevant information and newsletter.
Major highlights of the Make in India plans are as follows: 1. Invest India cell: An investor facilitation cell set up by the government will act as the first reference point for guiding foreign investors on all aspects of regulatory and policy issues and to assist them in obtaining regulatory clearances. The cell will also provide assistance to foreign investors from the time of their
5. Easing policies and laws: A vast number of defence items have been de-licensed and the validity of industrial license has been extended to three years. With a view to providing flexibility in working hours and increased intake of apprentices for on the job training, the government plans to introduce a single labour law for small industries by December. An advisory has been sent to all departments/state governments to simplify and rationalise regulatory environment (which includes online filing of all returns in a unified form).
Competitive Advantage of India Though India is a developing economy, its economy has a major impact on global trading. Thanks to its huge
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infrastructure provides India with a competitive advantage over other countries for attracting foreign investments. In terms of direct manufacturing costs, the new BCG Global Manufacturing Cost-Competitiveness Index shows that India has held steady from 2004 to 2014 relative to the U.S. Within Asia, India has the potential to become a rising regional star. Strong productivity growth and a depreciating currency have offset the increase in average manufacturing wages. Electricity and natural-gas costs have risen less than in most other major Asian export economies since 2004. So India today is considered to be one of the major forces in the global economic market.
On the other side of the coin… market base and fast-developing spending habits of middle-class Indians, India is a preferred destination for investors over other major countries, including China, because India has a favorable business environment, a good administrative setup, attractive foreign policies, and an available, abundant skilled workforce as well as provides attractive incentives to investors.
The factors other than direct costs undermine India’s competitiveness by adding risk and hidden costs. Bottlenecks at India’s seaports add days to shipping times. It typically takes six months to a year to clear all the regulatory hurdles needed to build a new factory in India. Labour laws that make it difficult and expensive for companies to manage their workforces during slow times discourage companies from building large-scale, cost-efficient factories. And while the government keeps electricity rates low for end consumers, in reality many manufacturers must pay much more for power than in other Asian economies. Because there is a perennial shortage of power capacity in the country, many factories must operate expensive diesel-powered generators on their own.
India scores over other places in terms of being an ideal destination for investments mainly due to its vibrant democratic setup, which is aptly underpinned by a broad legal framework and independent judicial system. Apart from these factors, the presence of a vast network of bank branches, financial institutions, and a wellorganized capital market contribute to making India a preferred destination over other places by foreign investors.
Victor Mallet, writing in the McKinsey book Reimagining India, recently offered an anecdote that was illuminating. “One of India’s largest carmakers recently boasted that it was selling more vehicles than ever and that it was hiring an extra eight hundred workers for its factory,” he wrote, “But the plant employing those workers belongs to the Jaguar Land Rover subsidiary of Tata Motors and is in the English Midlands, not in jobhungry India.”
India boasts a vast network of technical and management institutions that are of the highest international standards. These institutions develop excellent human resources. India also has a strong base of an English-speaking population for business purposes. The strategic location of the country in the context of the third world market in the rapidly growing southeastern Asian markets along with a supportive
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cent since 2006, which competitiveness. Just-in Monetary Fund show that trade surplus economy in
Mallet goes on to make a point that has been made frequently by Indian economists: The world doesn’t want to “make in India,” because it is simply too painful. There’s bureaucratic red tape, a difficult land acquisition act, troublesome environmental legislation, a shortage of electricity, and a lack of water resources. The only thing India doesn’t seem to lack is labour, but that merely adds to the problem. As Mallet points out in the same essay, aptly titled “Demographic dividend – or disaster?”, “India’s population grew by 181 million in the decade to 2011 – and (despite falling fertility rates) a rise of nearly 50% in the total number of inhabitants is unavoidable.” But the number of jobs being added to feed that population is inadequate.
is eroding its exports’ cost data from the International China is no longer the largest the world.
Therein lies an opportunity “Make in India” must tap. India’s labour costs are among the lowest in the world. According to the U.S. Bureau of Labor Statistics, average labour compensation (including pay, benefits, social insurance, and taxes) in India’s organised manufacturing sector increased only marginally, from $0.68 an hour in 1999 to $1.50 an hour currently. The average compensation in China’s manufacturing sector in contrast rose 20 percent year-on-year in the same period to $3 an hour. Besides, the cost competitiveness, India boasts a nearly 500-million-strong labour force comprising unskilled workers and English-speaking scientists, researchers, and engineers, making it a potential destination for cost-effective research and development-oriented manufacturing. Recent sporadic instances of the odd Chinese manufacturer setting up shop in India and a few Indian companies moving production bases back home from China are encouraging. Havells, Godrej, Micromax and autocomponents maker Bosch are amongst a handful of companies that have recently moved back to India some part of their manufacturing or outsourcing in China owing to currency, labour and other cost advantages. Thus “Make in India” will have to go quickly from being a statement of intent to real action on the ground.
Make in India vs Make in China: Tata Motor’s Jaguar Land Rover (JLR) recently opened its first plant in Changshu, China. The luxury carmaker’s $1.78-billion Make-in-China push has come a little over a month after Tata Group chairman Cyrus Mistry confessed to be greatly encouraged under Prime Minister Narendra Modi’s leadership to join the “Make In India” programme that, he said, brings together industry and government for crafting a new future. Markets across Indian towns and cities that are flooded with Chinese products, more so around festivals such as Deepavali, are grim reminders of how Made-in-China has come to dominate homes and offices. From furniture and gadgets to industrial equipment, India is importing almost all products from its neighbour, even yarn for saris. It is estimated that over 99 per cent of Bangalore silk saris are being made with Chinese silk yarn.
The Policy and Reforms Agenda India‘s Prime Minister Narendra Modi has unleashed a slew of reforms in the recent past, scrapping fuel subsidies, simplifying labour rules and pledging to open coal mining to private players in a bid to kickstart the economy.
As a result, the rapidly growing bilateral trade between the two neighbours is tilting heavily in China’s favour, at a rate that India has termed unsustainable. Bilateral trade crossed $65 billion in 2013, but while India exported $15 billion worth of goods to China, but imported $51 bn. The quality of trade also goes against India. India exports raw materials such as iron ore but imports manufactured goods. Under pressure from the U.S., China has had to appreciate its currency by 30 per
The much awaited labour reforms necessary for mass manufacturing in India were initiated by Prime Minister Modi recently as he announced steps to rationalise labour rules, around 250 of them at the Central and State levels, which is a welcome step for industry. The two
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key areas of reform are ‘unified labour and industrial portal’ and ‘labour inspection scheme’. Introduction of the labour identification number (LIN) and putting inspection on a unified portal will help bring transparency in the use of labour rules. The Prime Minister’s efforts to raise the minimum wage ceiling from ¹ 6,500 to ¹ 15,000 and to ensure EPF and the pension scheme for vulnerable groups are also laudable. The reform schemes named Deen Dayal Upadhyay Shrameva Jayate also include a Universal Account Number (UAN) facility for Employees Provident Fund Organisation (EPFO) subscribers.
administrative set-up such as how to speed up processing of patent applications, among other measures. India also moved recently to open up its coal industry to commercial mining, signalling the most serious shift in 42 years toward allowing private players full participation in the sector. Economists say they expect more progress on resolving labour issues and bringing in a national goods-andservices tax that will end the patchwork of levies making doing business in India costlier. As Dr.Raghuram Rajan stated, “In India, if you are looking for grand, big-picture reforms it may take some time coming... but in terms of decentralising, in terms of doing the small stuff which adds up to the big stuff, I think that is already happening.”
The department of industrial policy and promotion (DIPP) has constituted a think tank on Intellectual Property Rights to draft a national IPR policy and advise the government on a range of patents related issues. The panel will also give its views on possible implications of demands placed by negotiating partner countries. The objective of the think tank is to cull out a road map for the IPR policy of the country. This think tank would advise the government on IPR related matter, review the existing policy and recommend changes if need be, and suggest reforms in the
A steady pace of implementation of policy reforms, will lay the foundations for India’s real GDP growth to move higher to an average of 6.75% over the next 10 years. There are hurdles to achieving the near-7% growth rate, but the confluence of positive structural factors should provide the needed thrust for the ‘Make in India’ initiative and yield strong economic performance over the next 10 years.
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